‘I scratch your back, you scratch mine’

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Mixed signals, as always, from Japan. Activist investors are making some ground, most notably in Steel Partners v. Aderans (8170). Still, the climate for M&A and shareholder value unlocking investors is not made any easier by more expansive cross-shareholdings. A more concerted effort is needed by METI, FSA, TSE and the business lobbies. (See Reuters 7/29: Activist investors face long haul in Japan).

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Nikkei Weekly Outlook: Just Wait Until Friday

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Last week was another down week for the Nikkei, albeit very limited, but the Friday close of 13,942 was over 3.5% off the weekly high and the second consecutive week of a sub-14,000 finish. So, while the Nikkei had been showing signs of promise and not simply selling-off on every piece of bad news, a move beyond 14,500 has proven elusive. The N225 is up over 19% from its year-to-date and multi-year low of 11,691, but there are just not enough positive catalysts to push stocks higher, at present, in the face of all the bad news that continues to hit the wires day in and day out. And this month, we have hedge fund redemptions that could be putting further downward pressure on equities. Continue reading

Empirical Evidence Suggests Going Long Japan May Be Timely

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In “Hollowing Out, Tokyo Style,” FT Alphaville’s Gwen Robinson does a fine job of capturing an ongoing, and now accelerating human resources conundrum. While it seems like there’s no shortage lately of fake Japundits (not to be confused with the real Japundit, who is simply trying to keep it real on the cultural front) saying to go long Japanese stocks, boots-on-the-ground evidence provides further insight into the opaque. Continue reading

Nikkei Weekly Outlook: Testing Dubious Highs

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Last week’s question of resiliency or reluctance at 14,000 for the Nikkei 225 Stock Average was answered, somewhat predictably, with another late-week rally. The Nikkei ended the week higher by 2.3% to 14,338.54 and the broader TOPIX, which rose by the same amount, recouped the 1,400-level (1,408.14) for the first time since January 10th.

This week, the N225 is poised to test its Jan. 10 high of 14,388 and perhaps it’s not a stretch to throw in the 14,691 close on the first day of trading this year (its calendar year high close). But don’t get too excited (just trying to keep things in perspective), considering the N225’s 15,155 open on the first day of trading in 2008, let alone the 18,000-plus levels it once traded at last year! Continue reading

Nikkei Weekly Outlook: 14,000 in Sight Pre-Golden Week

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What to watch: Earnings reporting continues; JGB activity (unprecedented サーキットブレーカー (circuit breaker) action last Friday; rising yields but equity yields still attractive to the 10-year); Tues./Wed., April 29 -30: FOMC rate decision meeting; Wed., April 30: Bank of Japan (BoJ) monetary policy meeting; March – Industrial production; March – New housing starts; March – Unemployment and Ratio of Job Offers to Applicants; March – Household income and expenditure survey; U.S. Q1 GDP; Thurs., May 1: April – New auto sales; Fri., May 2: U.S. April – Unemployment and U.S. nonfarm payrolls

Ongoing: External factors, particularly U.S. earnings and economic data (see above) to influence domestic stocks; record commodities vs. weakening yen [¥104.5/$1 on Friday] Continue reading

Opportunity Ahead for Japanese Stocks as Commodities Speculation Wanes

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It’s no big secret that growth in real demand for commodities is nowhere near as much as the growth in daily trading of derivative contracts. Still, UBS Global Asset Management’s Tom Digenan (by way of USAA Financial Newsletters) has a chart showing actual oil demand grew to 85.9 million bpd in 2007 from 74.6 million bpd a decade earlier. During the same period, oil futures trading volume skyrocketed to 1.2 billion contracts per day compared to 200 million in 1997. That’s an annualized growth difference of around 20:1! Continue reading

Leverage, Illiquidity, BoJ Disarray, Much Needed Nikkei Holiday

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Japanese stocks rallied Wednesday, but not quite as high as may have been expected after the big gains in the states and in Chicago Nikkei 225 futures. Japanese ADRs gave back a lot of their prior day gains Wednesday. A number of ADRs had declines of more than 5%: FUJIFILM [[FUJI]], Mitsui & Co. [[MITSY]], Nidec [[NJ]], NTT DoCoMo [[DCM]] and Wacoal [[WACLY]]. The lone advancer was long-time favorite Internet Initiative Japan [[IIJI]]. There’s no escaping the volatility. And that’s why we’re not so certain we’ve seen a bottom yet for the N225. The matter of yen repatriation prior to fiscal year-end is one issue, while Q4 results and uncertainty of new FY outlooks due out from late April are another. Continue reading